My husband and I both have sizeable retirement accounts. The cost basis of mine is low compared to its current size so I made sure my accountant got the figures right and filed a correct Schedule 8606 Nondeductible Contributions to Traditional IRAs for both of us with our 2005 tax return. In years ’06 - ’08, the accountant did not include Schedule 8606 or if he did include it for one of us, it was wrong, reverted back to earlier incorrect figures. My accountant says, "No problem, I'll just file amended returns for the recent years it was wrong or not included." Is it really as simple as that? My husband will have to start making a mandatory distribution in 2010 so it is critical this is resolved.

asked 22 Nov '09, 17:42

Jacque's gravatar image

accept rate: 0%

The penalty for failure to file the 8606 for 2009 is $50. Not sure of prior years and did not look it up. What bothers me more than anything is the fact you are blaming your accountant for not filing a form correctly that only you can give him the information for unless he is handling your retirement accounts. You state that you gave him the 2005 information and made sure it was correct. Why did you not check over the subsequent years to be sure the form was included with the correct numbers? The taxpayer is responsible for checking the return before it is filed and you admitted that you knew there could be a problem. Should he have asked about a non-deductible contribution? probably, but the final blame lies with the taxpayer. If you don't tell us that you made contributions how are we to know?? We can't!


answered 22 Nov '09, 19:00

AJ's gravatar image

accept rate: 5%

Thanks for telling me the penalty AJ. I agree with you 1,000%. We can't know what is in the minds of our clients. I hate to answer questions from DIY'ers when they say their accountant "said". If they did, then either fire them or trust them.

(22 Nov '09, 19:10) SandySea

I've seen basis information not only for IRAs, but also for mutual fund investments given to CPAs annually to track the basis, but they do not establish any sort of a carry-forward schedule, and all they do with the information is "put it in a file", so it is not always the client at fault when the expectation was to "track the basis". Eventually, it makes for a nice little forensic evaluation exercise if I run into them!

(23 Nov '09, 00:17) Brent Berkman

It is the responsibilty of the taxpayer and the plan administrator to track the basis of the plan. Not the "CPA/ tax preparer". If that is desired then there is additional cost involved. If one choosed to do this as a general practice for all your clients, wonderful, but I do not think it is very practicle.

(23 Nov '09, 20:03) AJ

I don't agree if this is a non-deductible IRA and the preparer was informed that contributions were made. If this is the case, the preparer was wrong. We (as the preparer) are the only ones that know if the IRA was deductible or not - and WE tell the taxpayer.

Granted, we were not in the office of the OP and their tax person, but it IS OUR responsibility to file the 8606 if the IRA contribution was not deductible.

(23 Nov '09, 22:37) Helen EA in PA

You are correct IF the contributions were reported for that year to the preparer and we should always ask. But I get tired of fixing the mistakes of financial advisors that either don't know the rules or don't ask enough questions have clients enter into unallowed transactions that have to be fixed later at a greater cost.

(24 Nov '09, 14:26) AJ

If within the statute of limitations, yes, your accountant is correct he can amend and it is good to go. There is a small penalty I believe for not filing it timely, but if for due cause, I think this can be abated and your accountant will most likely not charge the penalty to you.

I don't think he even has to file a 1040X, just the Form 8606 and contact IRS on your behalf. Try and relax, I am sure if you have used him/her for years, he/she will take care of you.

Good Luck with this :)


answered 22 Nov '09, 17:54

SandySea's gravatar image

accept rate: 7%

An amended return can be filed at any time, even after the statute of limitations expires. It is usually pointless to do so (the IRS will not issue a refund of taxes for a year for which the statute of limitations has expired). However, in this situation, because of the implications for future tax years, filing a 1040X should be done.

(27 Nov '09, 23:18) stephenweins...

But you can file the 8606 alone without an X I assume

(28 Nov '09, 18:20) SandySea

The 8606 can be filed alone. And if it is change from the original, just put AMENDED on the top of it.

The penalty for missing the 8606 is $50 a year per taxpayer, but I have NEVER seen it assessed.

Helen, EA in PA


answered 22 Nov '09, 19:16

Helen%20EA%20in%20PA's gravatar image

Helen EA in PA
accept rate: 4%

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Asked: 22 Nov '09, 17:42

Seen: 5,112 times

Last updated: 27 Jun '11, 20:01